Bush Budget Proposes No USPTO Fee Diversion in FY 05

February 2, 2004. The Bush administration's summary of the proposed budget for FY 2005 for the Department of Commerce (DOC) provides for no user fee diversion in FY 2005.

The summary of the proposed budget contains the following statement regarding the U.S. Patent and Trademark Office (USPTO): "This Budget supports the fee legislation and a spending level of $1.5 billion that will allow PTO to continue implementation of its strategic plan. This proposal provides PTO full access to its fee collections in 2005."

Also, the USPTO issued a release that states that "The President’s FY 2005 budget submission allocates to the USPTO all of the $1.533 billion in fees it is projected to raise next year. This marks the first time since FY 1998 that a President’s proposed budget allows the USPTO to retain all of its fees in the year collected."

The USPTO is funded solely from user fees. However, since 1990 a part of the fees collected by the USPTO have been diverted to subsidize other government programs. Some companies that own intellectual property, trade groups, and proponent of innovation, have never liked this arrangement. They have called it a hidden tax, and a tax on innovation.

The President merely makes proposals. The Congress may still pass an appropriations bill that continues the practice of fee diversion. Moreover, this budget proposal merely proposes that there be no fee diversion in FY 2005; it does not include an express proposal to permanently end the practice of fee diversion.

Jon Dudas is the acting head of the USPTO. (Former Director James Rogan left last month.) Dudas stated that "The Administration has delivered on its promise ... American innovators have long fought for an end to fee diversion."

The USPTO release adds that "The President's proposed FY 2005 budget assumes enactment of the USPTO fee proposal to finance the agency’s 21st Century Strategic Plan. Without the new fees, full implementation of the plan is not possible. USPTO has been doing significant cost cutting to ensure implementation of elements of the plan’s critical quality and e-government initiatives. However, without the new fee schedule, pendency will increase and the backlog of unexamined cases will grow beyond the current inventory of 500,000 patent applications."

It adds that "The President's proposed FY 2005 budget puts the strategic plan back on track, allowing the agency to make its processes simpler and faster, deliver patents and trademarks of superior quality, and enhance overall productivity by:
 • E-Government - continuing migration to full electronic processing of patents and trademarks.
 • Productivity-hiring 900 new highly-qualified patent examiners.
 • Efficiency-finalizing the agency’s move to consolidated space in Alexandria, Va."

The actual proposed budget [45 pages in PDF] for the DOC contains the implementing language. (The USPTO language is at pages 227-9 of the proposed budget document, and at the 27th-29th pages of the PDF file containing the DOC portion of the budget.)

It provides the following. (Note that the terms with brackets are FY 2004 provisions.)

"For necessary expenses of the United States Patent and Trademark Office provided for by law, including defense of suits instituted against the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, [$1,222,460,000] $1,314,653,000, to remain available until expended, which amount shall be derived from offsetting collections assessed and collected pursuant to 15 U.S.C. 1113 and 35 U.S.C. 41 and 376, and shall be retained and used for necessary expenses in this appropriation: Provided, That the sum herein appropriated from the general fund shall be reduced as such offsetting collections are received during fiscal year [2004] 2005, so as to result in a fiscal year [2004] 2005 appropriation from the general fund estimated at $0: Provided further, That during fiscal year [2004] 2005, should the [total] amount of offsetting [fee] fees [collections] collected under this paragraph be less than [$1,222,460,000] $1,314,653,000, [the total amounts available to the United States Patent and Trademark Office] this amount of $1,314,653,000 shall be reduced accordingly: Provided further, That from amounts provided herein, not to exceed $1,000 shall be made available in fiscal year [2004] 2005 for official reception and representation expenses:"

It further provides that "Upon enactment of authorization to increase fees collected pursuant to 35 U.S.C. 41, any resulting increased receipts may be collected and credited to this account as offsetting collections: Provided, That not to exceed $218,754,000 derived from such offsetting collections shall be available until expended for authorized purposes: Provided, That the total amount appropriated from fees collected in fiscal year 2005, including such increased fees, shall not exceed $1,533,407,000: Provided, That beginning in fiscal year 2005 and thereafter, from the amounts made available for ‘‘Salaries and Expenses’’ for the United States Patent and Trademark Office (PTO), the amounts necessary to pay (1) the difference between the percentage of basic pay contributed by the PTO and employees under section 8334(a) of title 5, United States Code, and the normal cost percentage (as defined by section 8331(17) of that title) of basic pay, of employees subject to subchapter III of chapter 83 of that title; and (2) the present value of the otherwise unfunded accruing costs, as determined by the Office of Personnel Management, of post-retirement life insurance and postretirement health benefits coverage for all PTO employees, shall be transferred to the Civil Service Retirement and Disability Fund, the Employees Life Insurance Fund, and the Employees Health Benefits Fund, as appropriate, and shall be available for the authorized purposes of those accounts."